Use defensive strategy to get rich

When Alan Corey moved out of his mother’s Atlanta basement at 22 to face the real world, his goals were both clear and clearly preposterous: Have fun, hustle and become a millionaire by 30 in New York City.

Wrote and performed one-man stage show, “Creepy Little Famewhore,” at Manhattan’s Upright Citizens Brigade Theater and at East Coast college campuses.

Prank-pulling member of Improv Everywhere.

He made it with two years to spare, thanks to some savvy real estate timing in the Brooklyn revitalization, an unlikely run of appearances on reality TV shows such as “Queer Eye for the Straight Guy,” and what he calls “extreme cheapskate strategies” that enabled him to bank and invest more than 60 percent of his $40,000 salary.

In “A Million Bucks by 30,” Corey does his own well-earned end-zone dance. Here’s how he shrewdly borrowed his way into the seven-figures club.

You played a lot of defense (saving) before you could afford to play offense (buying and investing). Which of your penny-pinching techniques proved the most effective?

Ooh, I love sports analogies! I believed “defense wins championships” and still do. It’s the combination of all the techniques that make it effective. Saving in one area and not in another is like the ol’ yacht racing folly of having two holes in your dinghy and just plugging one.

How did you manage to ignore the siren song of credit cards?

If I couldn’t pay off the balance in full, I wouldn’t eat. It was a pretty motivating factor. I would suggest one of two approaches: 1) use it for everything, earn money back, and pay the balance in full each month, or 2) never use it.

You saved the lion’s share of your salary to get into investing, right?

I actually saved 61 percent of my take-home pay. I lived off of 39 percent of my take-home pay on a $40,000 salary, so it was roughly $15,000 before taxes. But it was fine. All my friends were early 20s college grads living in expensive New York and none of us had money. I had the highest paying job of all of my friends, but no one knew that. I just lived way below my means.

Yet you didn’t live in squalor.

No. I still went out basically every night of the week. It didn’t keep me from going out. I just did things that were free. I’d go to open-mic nights to watch musicians or comedians. I’d take a bus or walk there; I never took a cab. I just got creative and made everything fun. I didn’t sit home and suffer and pout. If you feel depressed when you’re trying to save money, you end up buying yourself gifts to feel better, and then what’s the point of working overtime?

Walk me through how you bought your first rental house.

OK. Let’s say I’m looking at paying $2,000 a month to mortgage payments. I would take that and add $400 of utilities, $200 of insurance and $200 miscellaneous. Basically, that puts me up to $3,000 a month. So I ask, do I have $3,000 a month? Hell, no.

So I go back to the house. The house has four bedrooms. I could live in one and have three roommates. So I look online to find out what a four-bedroom house rents for in this neighborhood. OK, let’s say it rents for $3,500. So I could buy it, rent it out, and I don’t ever have to move in and I make $500 a month.

But I still need a place to live. So $3,500 divided by four is roughly $875 a month. I gave my friends a discount to live with me, $700 a month, and I rent out three of the bedrooms. That’s $2,100 a month. So OK, I’m paying $1,400 a month. I would probably pay more in this neighborhood to live in an apartment by myself, but this way I own the place and build equity. I can afford that on my paycheck instead of $3,000.

How did you convince the bank to finance you with three roommates?

I go to my three friends and say, “Guys, if I buy this house, will you live with me and would you sign a two-year lease?” They all say, “Yeah, you’re going to give us a break in rent, this house is great.” So I get them to sign a lease and get their bank statements, then I would go to the bank and say, “Listen guys, this is such a low risk to you. I have three people with these separate incomes willing to pay this much, they have signed this contract. If you add up all these incomes, it’s more than what you’re charging me, plus some, so you have very, very little risk to lend me the money to buy this house. You can’t really argue with those numbers.”

That’s the way to boost your income. I’ve got these three buddies who are also going to help pay off this loan with me, funneled through me. That’s one way to get a house. That’s how I did it.

What effect did that first rental have on reaching your million-dollar goal?

That pretty much set the stage for everything else. What happened is, my mortgage on that first rental house was actually $2,500 a month; my rental income was actually $4,500 a month, so I was being paid $2,000 a month to live in my own house in Brooklyn. That set the stage because all of a sudden I was out of the rat race. As long as I didn’t spend $2,000 a month, I didn’t ever have to work again. I kept my day job throughout this and was making $100 in passive income renting out my first apartment. It was a lot of work, a lot of due diligence, but basically I had to prove to the bank that I was less risk than they would think I was.

Your experiences as a self-described “fame whore” on reality TV shows like “Queer Eye” and “The Restaurant” seem less than lucrative. Was that simply a way to have fun and free your inner crazy guy, or were you experimenting with building a media brand a la The Donald?

A bit of both. I was hoping to maybe spin it off into something bigger, but at the time it was a choice to either be on TV and make some pocket change, or go home and watch TV and make nothing. I ended up getting hate mail from my appearances, so I don’t think the media-branding part worked very well. But I did get free interior design and an apartment full of furniture from “Queer Eye.”

You were tucking away money in IRAs and a 401(k) before most of your friends knew what those things were. Weren’t you tempted to keep that money “in play” for down payments and such?

I knew starting young on IRAs and 401(k)s were crucial to my goal of being a millionaire before 30. I considered it my “no touch” money. I made a decision when I put it in and stuck to it. It was tempting at times, but I’d made a promise to myself.

Have you ever borrowed from family?

I was in the situation where I borrowed money from friends and family to buy a house. I went to four different people to borrow $5,000 to come up with half of the down payment for a house, and promised to pay them back within two years with 10 percent interest. I made them sign papers because it made me feel more comfortable to be held to this loan agreement. Friendships are lost over business deals and I didn’t want any of that.

That was a great deal for them and a good deal for me because I couldn’t buy this house otherwise. But I had done the numbers and knew that the rental income was going to pay back these loans for me within two years. I knew, worst-case scenario, I could sell one of my other properties to pay back those loans.

The way it worked out, I was able to pay back all of their loans in one year, but I paid them the 10 percent interest as if I had waited the two years. They were happy because they got more money in half the time, so now if I’m ever in the position where I need to borrow money again, I’m a good lender to my friends and family. Luckily, I’ve never had to go back to them.

How much real estate did you eventually own?

I had five houses and one restaurant. I’ve sold them all except for one two-family house; I live in one unit and rent out the other unit. I sold most of them before the market got soft.

You remained a fairly conservative investor, considering the times. What kept your inner Donald Trump in check?

Two things kept me going. One, I was young and determined. I was going to just go all out and do this as fast as I could in my early 20s. I knew it was all going to be a house of cards, so if one property failed me, it really could affect all of my other properties. So I would make sure that none of the properties went bad.

The other thing was, in the back of my head, worst-case scenario, I lose it all and go bankrupt. I would still be 26 and could start over. Some people are just starting out at 26. I never wanted to be there (bankrupt), but at the same time, all things considered, there were ways to recover from my worst-case scenario.

Any words of advice for would-be millionaires?

Two things. First, there is always a way to get money to buy whatever you want, but you have to be smart about it. You really have to do the numbers: How much is this going to cost me a month and how much money am I going to make a month? As long as the money coming in is more than the money going out, the banks will lend you money and it’s a good investment for you.

Second, always overestimate your expenses. If they were giving me figures on the heating bill or the water bill on a house, whatever they told me I would basically double it. I took all of the expenses as worst-case scenario and I took all my income as worst-case scenario. Say I get laid off in three months, or say I don’t get that raise or bonus — I wouldn’t count things that were uncertain as income and I wouldn’t count the (expense) numbers they quoted me as exact numbers; I would always add $50 or $100 to pump it up.

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